KYRIAK LAW LIMITED v 136 FANSHAWE LIMITED [2020] NZHC 2431

KYRIAK LAW LIMITED v 136 FANSHAWE LIMITED [2020] NZHC 2431 [17 September 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-001408[2020] NZHC 2431BETWEEN KYRIAK LAW LIMITEDApplicantAND 136 FANSHAWE LIMITEDFirst RespondentCARSON FOX BRADLEY LIMITEDSecond RespondentNEW ZEALAND MORTGAGES ANDSECURITIES LIMITEDThird RespondentMANSONS FANSHAWE LIMITEDFourth RespondentHearing: 16 September 2020Appearances: T Kyriak for ApplicantW McCartney for First and Second RespondentsD Bennington for Third and Fourth RespondentsJudgment: 17 September 2020COSTS JUDGMENT OF VENNING JThis judgment was delivered by me on 17 September 2020 at 4.00 pm, pursuant to Rule 11.5 of theHigh Court Rules.Registrar/Deputy RegistrarDateSolicitors: Kyriak Law Limited, AucklandCarson Fox Legal, AucklandDuncan Cotterill, AucklandCounsel: W McCartney, Auckland[1] The applicant sought orders for particular discovery before the commencementof proceedings against the four respondents. The application was resolved beforehearing. The respondents agreed to provide the documents and information sought.The application for discovery was withdrawn by leave. All that remains is the issueof costs. To avoid the further expense associated with the exchange of memoranda oncosts the Court heard oral argument on the issue of costs when the matter was beforethe Court in the duty Judge list on 16 September 2020.Parties/background[2] Kyriak Law Limited (Kyriak) is a law firm. It formerly acted for the firstrespondent, 136 Fanshawe Limited. The first respondent pursued proceedings againstthe third and fourth respondents. Prior to the scheduled fixture the first respondentterminated its instructions with Kyriak and instructed the second respondent. The firstrespondent ultimately settled its claim against the third and fourth respondents beforehearing.[3] Kyriak claimed a lien over the first respondent's files in relation to unpaid costsit claims from the first respondent. When Kyriak became aware of the settlement ittook steps to enforce its lien. The first respondent did not accept the costs werereasonable and cancelled the contract of retainer. It has subsequently complained tothe Law Society about Kyriak's costs.[4] In order to enforce its lien, and before the first respondent had complained tothe Law Society, Kyriak engaged in correspondence with the respondents seekingdisclosure of the settlement agreement and of the trust records of the secondrespondent relating to the payment in or distribution out of the settlement moneys.[5] The applicant first wrote on 21 July 2020 to the second respondent advisingthat it had received notice of settlement of the claim by the first respondent against thethird and fourth respondents. It requested a copy of the agreement reached betweenthe parties and details of any payment made. On 23 July the second respondentadvised that the settlement agreement was confidential and that they had done nothingto prejudice the claimed lien.[6] On 27 July Kyriak replied, noting thatIn the absence of clarity in relation to the payment of our outstanding fees itis necessary to seek the assistance of the court.[7] On 28 July the second respondent's solicitors advised that they had instructionsto make a complaint to the Law Society about Kyriak's fees, which was expected tobe lodged by 7 August, and further stated that:Meanwhile funds will be held in our trust account.I repeat, nothing has been done to prejudice your claimed lien.[8] I interpolate here that the settlement agreement contained a clause expresslydealing with Kyriak's costs:6.1 The Undertaking will be in writing and will say that Matthew Carsonundertakes to NZMS, Mansons Fanshawe, and Duncan Cotterill:1. To receive into the Carson Fox Trust Account the SettlementSum.2. To hold the full amount of the Settlement Sum claimed byKyriak Law pursuant to its claim to a solicitor's lien on theSettlement Sum, until such time as Kyriak Law quantifies itsclaim, and then to hold the maximum amount claimed byKyriak Law until the amount, if any, payable to Kyriak Lawis agreed, or finally determined by the New Zealand LawSociety or by a court or arbitrator.3. To pay to Kyriak Law from the amount so held whatever sumis agreed or finally determined to be payable to Kyriak Law.[9] Kyriak responded and demanded a detailed undertaking.[10] On 3 August the second respondent replied again recording that the terms ofthe settlement were confidential and they could not therefore discuss the amount theywere holding and they would not be giving any undertaking. They again noted theyhad instructions to make a complaint to the Law Society regarding the fees.[11] Kyriak then filed this application on 26 August.[12] Kyriak's application was accompanied by a draft statement of claim to enforceits lien.[13] As noted, before the first call of the application the respondents agreed toprovide the information sought reserving their position in relation to costs.Parties' positions[14] Kyriak submits it has succeeded in that it has obtained the information it soughtand costs should follow the event. It seeks costs on an indemnity or increased basisagainst the first respondent and costs on an increased or 2B basis against the secondrespondent. During the course of oral submissions Mr Kyriak advised for the firsttime that Kyriak did not pursue costs against the third and fourth respondents. Hesubmitted that costs should lie where they fall in relation to the third and fourthrespondents.[15] Mr McCartney, appearing for the first and second respondents, submitted thatboth the first and second respondents were entitled to costs on a 2B basis against theapplicant or as a fall-back position in the case of the first respondent, at most costsshould lie where they fall.[16] Ms Bennington for the third and fourth respondents confirmed they soughtcosts on a 2B basis against the applicant.Jurisdiction[17] Although this is an application in advance of proceedings, there is clearlyjurisdiction to provide for the issue of costs.1 High Court Rule 8.22(3) contemplatescosts orders may be made in relation to not only compliance with any order, but alsoin relation to the application itself.[18] In Clear Communications Ltd v Telecom Corporation of New Zealand Ltd theCourt confirmed the general discretion as to costs applies.2 When exercising itsdiscretion the Court will take into account a number of factors, including the reasons1 Nelson v Ditmar [1986] 2 NZLR 48; Skelton v Howcroft [2018] NZSC 67 at [12]; and HCR8.22(3).2 Clear Communications Ltd v Telecom Corporation of New Zealand Ltd (1994) 8 PRNZ 200.the application was opposed, whether the opposition was reasonable and the extent ofany success achieved.[19] Before addressing Kyriak's submission that costs should be payable in itsfavour on an indemnity or increased cost basis, it is necessary to determine where theincidence of costs should lie.[20] In support of its application for costs against the first and second respondents,Kyriak says it has succeeded so that costs should follow the event. Counsel referredto the cases of Wislang v University of Otago and Blakley v Blakley as examples ofcases where the Court had made costs awards on that basis.3 But in both of those casesthere had been a fully opposed hearing and the issues determined on the merits.[21] In the present case Mr McCartney filed an amended notice of opposition andsubmitted that the Court would not have made the order Kyriak sought because thedraft statement of claim was complete and showed that Kyriak could have filed itspurported proceeding without the information in relation to the settlement and thedetails of the solicitor's trust account. In the circumstances it could not be said thatKyriak could satisfy the criteria for the order.[22] Mr McCartney also suggested that given the Law Society complaint had beenfiled no steps could be taken to enforce it.4 I do not regard this application as anapplication to recover costs. That is not the relief sought. This application is a pre-cursor to such an action.[23] Mr Kyriak's response to Mr McCartney's first point was that, withoutknowledge of what was involved in the settlement of previous proceedings theproposed claim might have been impractical. However, as I read the reference toimpractical in r 8.20 it is directed at impractical from a legal point of view rather thanfrom a commercial or economic point of view. I note it refers to formulation of theclaim.3 Wislang v University of Otago [2013] NZHC 2533; and Blakley v Blakley [2014] NZHC 1730.4 Lawyers and Conveyancers Act 2006, s 161.[24] There may be force in Mr McCartney's first point. But the short point in anyevent is that the application has not been determined on its merits. In response to theapplication the first and second respondents have obtained the authority of the thirdand fourth respondents to provide the information to the applicant and the firstrespondent has authorised the second respondent to provide the relevant information.As they say, the documents have been made available to avoid wasting the Court'stime.[25] The first respondent had control of the relevant documentation. It was for it toobtain the consent of the third and fourth respondents to the settlement agreement tothe release of the agreement. It also could have instructed the second respondent torelease its trust account information. It could have taken those practical steps at anearlier stage. I do not consider it is entitled to costs. But neither should it have to paythe applicant's costs. It has not been determined against it that it should have or thatit would have been ordered to. Kyriak's suggestion that it should have costs on anindemnity or increased basis is misconceived.[26] Mr Kyriak relied on the decision of Woolford J in Gilbert v Auror Ltd.5 Thefirst point is that in fact the costs awarded by the Court were in favour of therespondents not the applicant for pre-commencement discovery. Next, the Courtrejected a submission that the applicant had acted vexatiously, frivolously, improperlyor unnecessarily, taking the view that the applicant needed time to consider herposition on a fully informed basis, also noting that in that case the respondents hadargued the applicant had failed to engage with them once the application had beenserved.[27] In this case the parties engaged and ultimately agreed to resolution on apractical basis. The case of Gilbert v Auror does not support the applicant's claim forcosts on any basis.[28] The second respondent's primary obligation was to the first respondent whichhad engaged it as its legal adviser. I am not prepared to make a finding the secondrespondent acted unreasonably in its correspondence with the plaintiff. In hindsight,5 Gilbert v Auror Ltd [2017] NZHC 1655.the second respondent could have perhaps provided more assurance or clarity to theapplicant given the terms of the undertaking in the settlement agreement but I acceptit was not required to provide the undertaking demanded by the applicant prior to theissue of proceedings. What it set out in its correspondence was correct. Kyriak soughtmore by way of its proposed undertaking than was justified.Result/orders[29] In the circumstances, in relation to the first respondent costs are to lie wherethey fall. In relation to the second respondent the applicant is to pay costs to the secondrespondent on a 2B basis, together with disbursements. In relation to the third andfourth respondents, the applicant is to pay one award of costs on a 2B basis (that is,the costs are to be shared by the third and fourth respondents) together withdisbursements. The third and fourth respondents were represented by one counsel andhad no real role to play in responding to the application.[30] The costs are to be for the notices of opposition, preparation for a casemanagement conference and a quarter day for the hearing.__________________________Venning J